Insurance Claims, Litigation Likely to Follow Coronavirus Business Interruptions, Lawyers Say
Norton Rose Fulbright partner Neel Lane of San Antonio, who represents major insurance companies, said, "The more I think about it, the more that I can imagine various sorts of insurance claims based on the pandemic that we are experiencing."
March 11, 2020 at 02:00 PM
4 minute read
With coronavirus affecting supply chains and causing event cancellations, lawyers say disrupted businesses will start looking to their insurance providers to make up their losses.
But while companies losing money are likely to file claims, lawyers expect insurance providers to argue that coronavirus disruptions aren't covered by the policies. With so much money on the line, this could spark litigation by the policyholders against their insurers.
"The scope of potential claims in the insurance market is astonishing, really," said Norton Rose Fulbright partner Neel Lane of San Antonio, who represents major insurance companies. "The more I think about it, the more that I can imagine various sorts of insurance claims based on the pandemic that we are experiencing."
Haynes and Boone partner Adrian Azer of Washington, D.C., said on a Tuesday webinar by the American Bankruptcy Institute that many companies purchase "business interruption" coverage as part of their property insurance policies.
"That is where you are probably going to get coverage out of this," he said.
Normally, an "act of God" event like a hurricane or flood triggers that coverage, said Azer, who expects insurance providers to argue that coronavirus does not count as a "physical loss or damage" at a facility for insurance purposes. But Azer added that courts in New York have found that an E. coli bacterial outbreak did require insurance coverage.
Some companies may file claims under "civil authority" coverage, which helps with problems stemming from government actions.
"You could see the U.S. government locking down entire towns, like they are doing in Westchester, for example," Azer said, noting that this is the type of thing that civil authority coverage is designed to cover.
Neel, the San Antonio insurance litigator, said a company that offers events to the public may face a quandary when deciding whether to proceed, or cancel. On one hand, there are advertisers, ticket holders and vendors who want the event to go on. On the other hand, the company could be liable if it holds the event and causes coronavirus to spread.
"It's a damned if you do, damned if you don't situation," Neel said. "Recently, I was trying to figure out if a client could purchase protection against having to cancel an event based on a pandemic, and specifically, coronavirus. What I understand is: There is no coronavirus coverage. All event coverage, going forward, will completely exclude coronavirus as a covered loss."
Azer, the Washington, D.C. insurance lawyer, explained that after the SARS epidemic in 2003, many insurance companies specifically excluded coverage for losses from bacteria or viral infections from events coverage. To have those risks covered, companies would have to ask for it specifically, and of course, pay higher premiums.
"You really have to dig into your policy and examine it," Azer said.
Neel said that he can imagine disputes over many more scenarios.
For example, he said that directors and officers insurance coverage may come into play if a company faces a lawsuit alleging it did not do enough to protect its own employees, or its customers, from exposure to a pandemic.
If a company's quarterly earnings take a hit because of coronavirus disruptions, it's possible that shareholders will file suit, alleging the company failed to disclose the vulnerabilities in its supply chain, Neel said. He's not sure those types of lawsuits will succeed, but said it's certain that insurance companies will be forced to review them to see if coverage applies.
There's one type of suit that Neel definitely expects to see, probably within this year.
He explained, "If you operate any kind of health facility where you have numerous residents or patients, you are going to be at particular risk of suit if someone dies and it's alleged you didn't take reasonable steps to protect the safety and lives of the patients."
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllAmid Growing Litigation Volume, Don't Expect UnitedHealthcare to Change Its Stripes After CEO's Killing
6 minute readAlston & Bird Achieves Higher Rating for Medicare Advantage Insurance Companies
3 minute readDallas Court of Appeals Lets Stand Injury Caused by State Farm Payment Delay
4 minute readLaw Firms Mentioned
Trending Stories
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250